Annika Has Purchased Put Options on 1000 Shares of Amazon

question 7

Essay

Annika has purchased put options on 1000 shares of Amazon stock with a striking price of $270 per share. The option premium was $6.00 per share.
a. Compute Annika's profit or loss if the market value of Amazon's stock is $280 at expiration.
b. Compute Annika's profit or loss if the market value of Amazon's stock is $260 at expiration.
c. Compute Annika's profit or loss if the market value of Amazon's stock is $272 at expiration.

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Definitions:

Korean War

A conflict from 1950 to 1953 between North Korea, supported by China and the Soviet Union, and South Korea, supported by the United Nations, primarily the United States.

Thirty-Eighth Parallel

A line of latitude that is often referred to as the pre-Korean War boundary between North Korea and South Korea.

Defensive Alliance

An agreement between nations to provide mutual support in case one of them is attacked by a third party.

West Germany

The informal name for the Federal Republic of Germany during the period from its formation in 1949 until German reunification in 1990, contrasting with East Germany, the German Democratic Republic.